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May 8, 1999, marks the hundredth birthday of Austrian economist Friedrich A. Hayek. One of Hayek’s most important and lasting contributions to human understanding has been his development of a theory of spontaneous order. Hayek argued (echoing the 18th-century Scottish moral philosopher Adam Ferguson) that much, if not most, of the social order is “the result of human action, but not of human design.” Society is the evolved and cumulative outcome of multitudes of generations of human actors’ pursuing their individual ends; and through their interactions with each other, they have often generated social institutions, norms, patterns, and rules that were no part of the original intentions of the respective social participants.

Hayek also emphasized that a system of division of labor brings with it a division of knowledge. Each individual in his respective corner of the society comes to possess specialized and local knowledge, the full significance and usefulness of which only he may completely understand and appreciate for its successful application to various economic and social purposes. This is reinforced by the fact that a good portion of that special and localized knowledge is “tacit” or “inarticulate.” Those terms refer to the kind of knowledge we all possess about how to do many things in daily life but which we all would find difficult to explain or formalize into a simple textbook formula for others to completely understand and easily copy.

His insight into the nature of knowledge in society led Hayek to also highlight that the fundamental role of all forms of competition, including marketplace competition, is to serve as a discovery procedure. It is only through actual competition that individuals find out what they know and can do. Competition in this sense is also the arena of actual acquisition of new knowledge and discovery of applications of it for improvement of the human condition. The acquisition of knowledge and discovering uses for it are an open-ended process, the full prediction and anticipation of which are impossible. We will learn all the things that man may be able to create and discover only through the actual processes of creation and discovery.

Hayek’s arguments about the nature of knowledge, discovery, and competition have inspired a generation of free-market advocates who have used his ideas to show why all forms of government planning and regulation restrain and prevent social advancement. Planning and regulation limit progress and improvement to what the planner and regulator can understand, appreciate, and then choose to allow to be tried and experimented with.

One of the complaints that Hayek’s friends and students have often made about these ideas is that Hayek presented them in extremely abstract and generalized forms, with little “real-world” applications and examples. That criticism has now been met by Virginia Postrel in her recent book, The Future and Its Enemies. Though she does not say so in so many words, her goal clearly is to take Hayek’s defense of a free social order without central government design and show how the spontaneous order of society has improved the human condition and how it can be hindered only by those who desire to consciously direct the evolution of technology, innovation, and discovery.

She argues that visions of society can be divided into two general categories: stasis and dynamism. The stasist conceives of society as something to be controlled and directed under the presumption that the planner and regulator have the knowledge and ability to anticipate and direct the future shape of things to come to a final and knowable goal. The dynamist, on the other hand, accepts the fact that future information and all its implications and applications cannot be known ahead of time. Only by trial and error, experimentation, and decentralized competition can we ever discover what we might be able to learn and devise as answers to human problems and improvements to the human circumstance. And the dynamist considers that there is no final end or goal, only a never-ending process of change and discovery.

Postrel demonstrates the nature of this dynamic process with one detailed historical example after another. She traces the development of contact lenses, the devising of sanitary napkins for women, the evolution of cities, and the creation of the computer industry to show how and why it is unlikely that many of the things taken for granted in everyday life, things that have made our lives better, easier, and more comfortable, would have ever come into existence if not for the freedom of individual innovators, designers, and developers to try new ideas and build on the attempts and experiments of others outside and without the permission of government approval and control.

She also shows why it is that the attempt to predict and guide the future is and always will be an impossible task:

“Predictions go wrong because there are many possible sources of error…. The world is full of X-factors, the unarticulated and unrealized knowledge that can be elicited only by experience and experiment…. Knowledge is at the heart of a dynamic civilization — but so is surprise. A dynamic civilization maximizes the production and use of knowledge by accepting widespread ignorance. At the simplest level, only people who know they do not know everything will be curious enough to find things out. To celebrate the pursuit of knowledge, we must confess our ignorance: both the celebration and the confession are central to dynamic culture.”

Again, Postrel demonstrates the idea with concrete examples about the evolution of rules and techniques for the use and applications of the things around us that came about precisely because it was impossible to know all the possibilities in them before we tried using them in various ways; and in the process of trying and experimenting, we find out things we did not know and couldn’t have even imagined independent of the doing and the freedom to do.

Postrel’s book stands out as one of the best popular defenses of the ideal of a free society precisely because she covers the skeletal principles of liberty with the flesh and blood of history, everyday real life, and examples of things around us that we take for granted. It is one of those rare instances of a well-balanced blending of theory and practice that may yet make free men and free markets a reality in the next century.

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Dr. Richard M. Ebeling is the recently appointed BB&T Distinguished Professor of Ethics and Free Enterprise Leadership at The Citadel. He was formerly professor of Economics at Northwood University, president of The Foundation for Economic Education (2003–2008), was the Ludwig von Mises Professor of Economics at Hillsdale College (1988–2003) in Hillsdale, Michigan, and served as vice president of academic affairs for The Future of Freedom Foundation (1989–2003).

Reading List

Prepared by Richard M. Ebeling

Austrian economics is a distinctive approach to the discipline of economics that analyzes market forces without ever losing sight of the logic of individual human action. Two of the major Austrian economists in the 20th century have been Friedrich A. Hayek, who won the Nobel Prize in Economics, and Ludwig von Mises. Posted below is an Austrian Economics reading list prepared by Richard M. Ebeling, economics professor at Northwood University in Midland and former president of the Foundation for Economic Education and vice president of academic affairs at FFF.